Bangladesh Association of Banks (BAB) has requested finance adviser AB Mirza Azizul Islam to divert more public funds to private commercial banks (PCBs) to improve their liquidity position.
The BAB requested the finance adviser at a meeting Wednesday to double the deposit of public fund to increase the bank liquidity. Only 25 per cent of the public funds are deposited with the PCBs, it said.
The BAB leaders informed the finance adviser that some loan proposals are not being materialised by the PCBs due to liquidity shortfall.
Their statement echoed the concern expressed by Annisul Huq, president of the Federation of Bangladesh Chambers of Commerce and Industry, over lack of investment in new project due to liquidity shortfall in banks.
"Liquidity crisis was preventing businessmen from investing in new projects," Mr.Huq said at meeting with the members of the Economic Reporters Forum (ERF) Saturday last.
"There has been a mismatch between the disbursement of credit and deposit receipts. As a result, some PCBs have already increased their interest rates on deposits to collect funds from general depositors," BAB chairman Nazrul Islam Majumder told the FE.
He also said some PCBs are now offering interest rates on deposits in the range between 13.50 per cent and 14 per cent.
The BAB also requested the finance adviser to reduce corporate tax on banks to 40 per cent from the proposed 45 per cent.
During the meting, finance adviser AB Mirza Azizul Islam assured the BAB leaders of taking necessary steps in this regard.
The finance adviser categorically said currently there is no liquidity crisis in the banking system, but banks might come under pressure because the investment is on rise for what he said improvement of business environment.
"Various government steps and announcement of an investment friendly-budget have encouraged investment," Mr. Islam told journalists after the meeting.
UNB adds: The government initiatives include measures to build business confidence, form the better business forum, announce investment-friendly budget, create political stability and improve the port management.
Asked about a reported move by the private banks to raise deposit rates to mobilise more funds for meeting the increased investment demand, he said: "They want to mobilise more resources; that is good."
The finance adviser, however, said there is no liquidity crisis in the banking system as the call money rates are not too high.
In contrast, BAB chairman Majumder said, they were not getting adequate deposits, even at higher rate, to meet the increased demand for fund.
He said a large amount of money might have been invested in the stock market.
